MONTREAL - Stock market indexes Asia-wide continued this week to ease towards a
new test of the lower bounds of their lowest post-crisis trading ranges after
failing to break up through them to the upside earlier this month. The MSCI
Asia Pacific Index recovered a bit on Friday to over 112 in mid-afternoon
trading Tokyo time, slightly below the midpoint in the lowest of its three
post-crisis trading ranges.
This week, volatility and percentage move were moderately highly correlated
(0.65), meaning that despite a down week, the best performers were actually
more volatile than the worst performers.
In Australia, the least-poor performer reviewed here and having near-median
volatility, the All Ordinaries Index was down 1.2% to 4,215 in late afternoon
trading Friday local time. Short-term
technical indicators became less favorable, turning mixed, but were still
positive overall. The test of its long-term support (based July 2010) in the
low 4,200s is so far successful but not necessarily over. Short-term resistance
is at 4,320 and 4,350; support is at 4,080 and 4,000.
The Tokyo exchange was the second-least poor performer yet the second-most
volatile. The Nikkei 225 was down 1.3% on the week to 8,422 in early
mid-afternoon Friday local time. There is a weak technical support just above
8,000, and two stronger long-term supports around 7,200. The 8,228 level could
be considered as the horizontal leg of a short-term descending triangle, but
short-term technical indicators reversed to the downside on Thursday, making a
breakout to the upside less likely.
The KOSPI in Seoul likewise reversed short-term technical indicators to the
downside on Wednesday and Thursday. The South Korean index KOSPI was unable to
penetrate the short-term resistance at 1,880 and is now trying to salvage a
long-term advancing-lows uptrend support (based October 2008) at 1,830. Also it
is still trying to vanquish its short-term descending-tops downtrend (based
August 2011). This sets up a symmetric triangle where the index has almost
reached its apex without definitive resolution, which must come to either the
downside or the upside quickly.
The Greater China complex followed a similar pattern, as Hong Kong and Shanghai
were the two least volatile and two worst performers in all of Asia, while
Taiwan fared better. The biggest loser of the week was Shanghai, where the SSEC
was down 5.8% on the week to 2,180 as of early afternoon Friday local time.
This is an important technical level. Having now definitively violated its
support in the low 2,300s, it is now testing a support is in the high 2,100s.
There is a long-term (based October 2007) ascending-lows uptrend that provides
potential support in the 2,020s next week; below that, only the 1,700s stand
out as a definite ledge upon which to rest. This week all short-term technical
indicators turned more negative, with a hint of overselling. However, the
downturn in these indicators only accelerated towards the end of the week.
In Hong Kong, the Hang Seng Index was at 18,136 as of the Friday noontime
break, down 2.4% on the week, with short-term technical indicators shifting to
the unfavorable side on Wednesday and Thursday. This suggests a resolution of
the short-term symmetric triangle to the downside. The medium-term and
long-term ones discussed last week will take more time to resolve. The index is
now in the vicinity of the second fan from late 2007 top, which could intervene
as a long-term support lower in the 17,000s, if it continues to descend.
Rounding out Greater China, the Taiwan exchange was the week's third-least
volatile and third-best performer, as the TSEC/Taiex lost only 1.4% by late
afternoon Friday local time to 6,798 as short-term technical indicators
remained mostly neutral, with a few downside suggestions but nothing
definitive.
The current level is both a short- and long-term support, arguably close to the
lower bound of the lower post-crisis trading trade. Another potential support
intervenes in the mid-6,100s although also it is weaker, but also there is a
separate potential very long-term support in the low 6,700s.
In Southeast Asia, Singapore’s Straits Times Index fell 1.9% on the week to
2,644 by early afternoon Friday local time. After last week violating to the
downside a short-term static support around 2,730, it this week failed to
confirm a potential long-term static support at 2,700. Short-term technical
indicators continued to be unfavorable, and even became a bit more so.
Lastly in India, the BSE Sensex 30 tied the Taiwan index for third least-poor
performance, losing 1.4% to 15,985 as of late morning Friday local time.
Short-term technical indicators remained poor overall, although some tried
unsuccessfully to reverse into positive territory and achieved neutral status.
It is continuing to test the important long-term support around the 16,000
level.
Reflecting the euro's weakness, the FT Asia Pacific Index lost only 0.3% to
191.02 by the Thursday close. It remains up against a confirmed long-term
resistance but has not yet so far ceded to it. Its short-term technical
indicators are actually favorable, presaging either a recovery in Asian
equities or a further decline of the euro.
Dr Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of Technology and The University of
Michigan, has researched and taught at universities in the United States,
Canada, France, Switzerland, and Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian Studies, Carleton University,
Canada, he also consults privately in a variety of fields.
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